Progress stalls for women on boards

The response from the business community to Lord Davies’ 2011 report recommending increasing gender equality in boardrooms was initially promising.

A recent report by the Cranfield University School of Management said there was a sharp increase in the percentage of new appointments going to women on both FTSE 100 and 250 boards, peaking at 44 per cent and 36 per cent, respectively.

The report said that over the past six months the percentage of new appointments going to women on both FTSE 100 and 250 boards have dropped to 26 per cent and 29 per cent respectively, “showing a considerable gap from the 33 per cent required to reach Lord Davies’ target of 25 per cent women on boards by 2015.”

When Lord Davies of Abersoch, former a chairman of Standard Chartered Bank, initially published his government-commissioned review of the numbers of women on boards in business in 2011, his findings were dismal.

At the time, 18 FTSE 100 companies had no female directors, and close to half of all FTSE 250 companies had no women in the boardroom.

Rather than calling for quotas, Lord Davies recommended asking listed companies to voluntarily set goals for 2013 and 2015 that would help them attain a minimum of 25 per cent female board member representation by 2015.

As an incentive, Lord Davies suggested a ‘comply or explain’ approach.

Companies now have to set and publish their own diversity targets and then explain to shareholders if those goals are not met.

To monitor progress, every six months the Cranfield University School of Management publishes an analysis of the current state of board-level gender diversity.

Cranfield’s 2013 report said that 25 per cent of FTSE 100 companies have now achieved the goal of 25 per cent female board member representation, and only seven FTSE 100 companies now have entirely male boards.

Despite the year-on-year improvements, figures show a drop in the percentage of women on executive committees from 18.1 per cent to 15.3 per cent since 2009.

It is therefore not surprising that headway is not being made in the numbers of women holding executive directorships.

Executive director positions are typically the most senior and hands-on roles in companies, such as chief executives or chief financial officers.

Women are more likely to be non-executive directors.

The 2013 Cranfield report says that despite women dominating human resources, law and marketing in general, this is not reflected at executive director level.

“In terms of paths to executive roles, while 48 per cent of female executive directors were internally promoted the equivalent percentage for men was 62 per cent.

“This bias forces women to seek promotion in other companies.”

Since publication of the 2013 Female FTSE Board Report, Business Secretary Vince Cable has threatened businesses with the possibility of quotas should the 2015 goal remain unmet.

Several European countries, including Norway and France, already have quotas in place.

In addition to domestic pressure, UK businesses face another challenge – the European Commission’s Gender Diversity Directive, requiring women to constitute 40 per cent of non-executive members of boards by 2020.

More companies will come under the EU directive than currently do under the UK initiative, so the Cranfield report emphasises the need for all businesses “to appoint more creatively, including utilising talent from outside the corporate mainstream.”

The report also recommends increasing the proportion of women on executive committees, “a rich resource pool for future main board directorships.”

With 176 women currently serving on executive committees in the UK, compared to 975 men, the lack of gender diversity is stark.

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